Correlation Between Westpac Banking and Paladin Energy
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Paladin Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Westpac Banking and Paladin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking Corp and Paladin Energy, you can compare the effects of market volatilities on Westpac Banking and Paladin Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Westpac Banking with a short position of Paladin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Paladin Energy.
Diversification Opportunities for Westpac Banking and Paladin Energy
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westpac and Paladin is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and Paladin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paladin Energy and Westpac Banking is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Westpac Banking Corp are associated (or correlated) with Paladin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paladin Energy has no effect on the direction of Westpac Banking i.e., Westpac Banking and Paladin Energy go up and down completely randomly.
Pair Corralation between Westpac Banking and Paladin Energy
Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 0.12 times more return on investment than Paladin Energy. However, Westpac Banking Corp is 8.55 times less risky than Paladin Energy. It trades about 0.39 of its potential returns per unit of risk. Paladin Energy is currently generating about -0.2 per unit of risk. If you would invest 3,128 in Westpac Banking Corp on August 24, 2024 and sell it today you would earn a total of 255.00 from holding Westpac Banking Corp or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking Corp vs. Paladin Energy
Performance |
| Timeline |
| Westpac Banking Corp |
| Paladin Energy |
Westpac Banking and Paladin Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Paladin Energy
The main advantage of trading using opposite Westpac Banking and Paladin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Paladin Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Paladin Energy will offset losses from the drop in Paladin Energy's long position.| Westpac Banking vs. Ecofibre | Westpac Banking vs. iShares Global Healthcare | Westpac Banking vs. Ridley | Westpac Banking vs. Australian Dairy Farms |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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